Urban Governance and Development Program: Emerging Towns ... · the progress in completing the...

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Urban Governance and Development Program: Emerging Towns Project

(IDA Credit No. 4905-NP and IDA Grant No. H661-NP)

Eleventh Implementation Review and Support Mission

(February 10 to 20, 2015)

Aide-Memoire

I. Introduction

1. The eleventh Implementation Review and Support Mission of the Urban Governance and Development Program - Emerging Towns Project (UGDP-ETP) was held during the period of February

10 to 20, 2015. The objectives of the mission were to review overall implementation progress and the

status of each component, with a focus on the priority actions agreed during the November 2014 mission.

In particular, the review focused on: (a) implementation status of municipal sub-projects; (b) mobilization

of Municipal Support Team; and (c) progress of institutional development activities, in particular the

procurement of consultants for revenue billing software.

2. The IDA team1 (referred to as the “Team” hereafter) would like to thank the officials of the Government of Nepal (GoN), especially from the Ministry of Urban Development (MoUD), the Ministry

of Federal Affairs and Local Development (MoFALD), the Ministry of Finance (MoF), the Department of

Urban Development and Building Construction (DUDBC), the Town Development Fund (TDF), and the

Project Coordination Office (PCO), as well as the project supported municipalities, for the hospitality and

courtesies extended during the review. The list of people met during the review is included in Annex I.

This Aide Memoire summarizes the main findings and recommendations of the Implementation Support

Review. A draft Aide Memoire was discussed at a wrap-up meeting on February 20, 2015 chaired by Mr.

Arjun Kumar Karki, Secretary, MoUD. As agreed at the wrap-up meeting, this Aide Memoire will be

classified as a public document as per the World Bank’s Access to Information Policy.

II. Key Project Data

Project Data Project Performance Ratings

Ratings Last Now

Board Approval: May 10, 2011 Achievement of PDO MU MS

Effectiveness Date: October 2, 2011 Implementation Progress MU MS

Closing Date: July 31, 2016 Project Management MU MS

Original Gr/Cr. Amt: USD 25 million Procurement MU MS

Restructuring (Level II): February 22, 2013 Financial Management MU MU

Restructuring (Level I): July 19, 2013 Safeguards MU MU

Cancellation: USD 6.4 million M&E MS MS

Revised Gr/Cr. Amt: USD 18.45 million Counterpart Funding S S

Amount Disbursed:

(as of February 12, 2015)

USD 8.68 million

(48.45% %)

Ratings: HS=Highly Satisfactory; S=Satisfactory; MS = Moderately Satisfactory; MU= Moderately Unsatisfactory;

U=Unsatisfactory; HU=Highly Unsatisfactory; NA=Not Applicable; NR=Not Rated.

1 The team comprised Elisa Muzzini (Sr. Economist/Task Team Leader), Silva Shrestha (Water and Sanitation

Specialist/Co-Task Team Leader), Shambhu Uprety (Procurement Specialist), Drona Ghimire (Environment Specialist), Pradip

Gautam (Consultant/Environment), Hari Prasad Bhattarai (Consultant, Social Safeguards), Yogesh Malla (Financial Management

Specialist), Pradeep Shrestha (Financial Management Consultant), Pawan Lohani (Consultant/Municipal Finance), Noor

Tamrakar (Consultant/Municipal Engineer), Tashi Tenzing (Consultant/Urban Development), Rajivan Krishnaswami

(Consultant/Municipal Finance) and Sushila (Jessy) Rai (Program Assistant).

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III. Achievement of Development Objectives (PDO)

3. Based on the Level I restructuring approved by the World Bank on July 19, 2013, the PDO is to improve the capacity of the participating municipalities to plan, implement and fund urban development

activities. A milestone action for the achievement of the PDO was the signing of the contract with the

IDA-funded Municipal Support Team (MST). This was achieved on January 16, 2015. The timeline for

completing project activities remains tight given the delay in procuring MST, and activities need to be

closely monitored. To fully capture project achievements, it was agreed with the PCO that a survey will

be carried out in the municipalities to assess increase in municipal capacity resulting from project

activities – beyond the PDO indicators – in critical areas such as improved citizen participation and

awareness, increased quality of constructions works, and increased procurement and financial

management capacity. Since the likelihood that the PDO indicators will be met by project closure has

significantly increased following completion of the key milestone actions for the mobilization of the MST

and the signing of contracts for municipal sub-projects, the rating for the achievement of the PDO is

upgraded to Moderately Satisfactory. The current results framework is presented in Annex II.

IV Implementation Status

4. Overall progress. Since November 2014, critical issues with regard to the procurement of the MST have been addressed and the MST consultants mobilized on January 22, 2015. It is now critical that

the MST consultants provide municipalities the support required to ensure completion of municipal works

and institutional development activities within the project period. All municipal sub-projects have

entered the construction phase, and construction works are on track for 12 out of 16 sub-projects. MoUD

has sent authorization letters to municipalities for the first and second installment of the municipal block

grant; however, release of funds has been delayed because of incorrect classification of the mode of

payment in the Red Book. This needs to be rectified by changing the mode of payment from direct

payment to reimbursable. The critical procurement of consultants for the municipal billing software

development has been completed, and the contract was signed on January 4, 2015. Because of the delays

in hiring the MST, the preparation/implementation of Revenue Enhancement Plans (REPs), O&M Plans

and Investment Plans is behind schedule. A plan to expedite these activities with the support of the MST

has been agreed during the mission. Detailed implementation progress is presented in Annex III. Given

the progress in completing the agreed milestone actions since November 2014, implementation progress

rating is upgraded to Moderately Satisfactory.

5. Progress of municipal sub-projects. With the signing of the contract agreement for the Tansen Road Improvement sub-project on November 21, 2014, all 16 municipal sub-projects are now under

implementation. Construction work is now on-going in 15 of the 16 sub-projects. The contractor has not

yet been mobilized for the Dhankuta Hile Bus Terminal sub-project due to objections from a homeowner

regarding the construction of the bus terminal building. The works need to start within a month to ensure

completion of the sub-project by the closing date. There has been some improvement in construction

progress and the percentage of sub-projects on track has increased from 66 percent in November 2014 to

75 percent now. Physical construction work is on track for 12 of the 16 sub-projects, while

implementation progress is delayed for four sub-projects, including three out of five Track I sub-projects

and one out of 11 Track II sub-projects. Issues related to non-availability of construction material

affecting implementation have now been addressed. A change in design may be required for the Kheti

Khola Bridge in Itahari to address the dispute regarding the high flood level and the abutment foundation.

Issuance of the variation order for the Amar Narayan Temple sub-project has been further delayed, and

another extension will be required to complete the works. It is now critical that the PCO (with the

assistance of MST) provides municipalities with the required support to address implementation issues.

Construction engineers have been mobilized for all sub-projects.

6. Progress in implementing the GAAP. The Project has institutionalized a system for handling grievances at both the municipal and central levels. Transfers of Executive Officers from the

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municipalities continue to be an issue affecting project activities. At the central level, the Team observed

that arrangements have been made to ensure smooth transition of Component Manager role when the

incumbent Component Manager was promoted or transferred to another position. The Team reminded the

PCO to request reports from municipalities for social audits of activities funded under the project.

7. Safeguards. There has been some progress with regard to safeguard support to the municipalities since the November review. MST has mobilized environmental and social experts to provide safeguard

support to municipalities. However, the prolonged absence of safeguard experts at the PCO from June

2014 to January 2015 has affected safeguard oversight and monitoring. This has led to weaknesses and/or

delays in reporting implementation of the municipal sub-projects’ Environmental Management Plans

(EMPs) and delay in carrying out safeguard screening of block grant activities. A few municipalities

have started to include safeguard reporting as part of the monthly progress reports submitted to the PCO,

but the reporting needs improvement. It is critical that MST safeguard experts quickly get up to speed and

provide technical support to municipalities to ensure timeliness and quality of safeguard monitoring and

reporting and expedite the screening and field verification of FY15 block grant activities. A plan has

been agreed during the mission to improve monitoring and reporting and building municipalities’

safeguard capacity. A detailed assessment of social and environmental safeguard work and agreed actions

are included in Annex IV. The overall performance rating for safeguards remains Moderately

Unsatisfactory.

8. Project Management. There have been significant improvements in project management since the milestone action for the procurement of the MST has been completed. With the hiring of the MST,

municipalities are now provided with critical support for construction supervision, safeguards and

institutional development activities. Two regional offices covering the Western and Eastern clusters are in

the process of being established in Lekhnath and Itahari municipalities respectively. The MST inception

report, which is due within a month of mobilization, will detail the work plan of MST; the MST was

requested to ensure that the international finance advisor travel to Kathmandu at the earliest to expedite

institutional development activities for the municipalities. The Team was informed that the national

finance specialist mobilized by the MST will be replaced, and a short-term expert will be mobilized to

ensure continuity while the new specialist is hired. The Team requested the PCO and MST to ensure that

institutional development support to the municipalities is not affected by the replacement. There have

been changes in the Deputy Project Director and Component Manager for the MoUD Component, as the

incumbent officials were promoted. Replacements have been identified and have been oriented with

sufficient overlap to ensure smooth handover. At the wrap-up meeting, Mr. Karki, Secretary, MoUD

informed the Team of the decision to appoint a full-time project director for the project; the Team

provided concurrence to the Ministry’s decision. The Team noted the importance of ensuring coordination

among the central level agencies and regular participation of the agencies in meetings. Because of the

increased support provided to the municipalities in critical areas for project implementation through the

MST, the project management rating is upgraded to Moderately Satisfactory.

9. Monitoring and Evaluation (M&E). There has been progress in the project M&E system since the November mission. Efforts have been made to collect information on a regular basis from municipalities

and project agencies and a monthly M&E report has been prepared and submitted to the Team for review.

However, the monthly progress reports need to be improved to address gaps in information collected at

the municipal level (especially block grant) and institutional development activities carried out by central

agencies. The rating for M&E remains Moderately Satisfactory.

10. Project Risk Assessment. Project risk remains “Substantial”. The lack of elected local officials and the frequent change (every 6 to 12 months) of Executive Officers (EOs) in the six municipalities

represent a significant risk to the achievement of the PDO. Delays in procuring the MST have

significantly increased implementation risk, and the timeline for completion of project activities is very

tight.

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V. Procurement, Financial Management and Disbursement

11. Procurement. Contracts have been signed for almost all major procurements as per the procurement plan. The procurement plan has been finalized and needs to be submitted in SEPA. Progress

has been made with the procurement of civil works, and all works are likely to be completed by project

closure. Continuous support needs to be provided to the municipalities in the areas of contract

management, and all contract variations need to be expedited to ensure sufficient time for approval and

completion of works. In light of the progress made to complete procurement of critical activities, the

procurement rating is upgraded to Moderately Satisfactory.

12. Financial Management. The approved budget for FY 2014/15 is NRs. 775.45 million (Recurrent NRs. 514.86 million; Capital NRs. 82.21 million; and Financing NRs. 178.38 million). Expenditure of

NRs. 86.95 million (11.21% of the approved budget) has been incurred as of February 12, 2015. Reasons

for slow implementation include late approval of the annual work program, delay in procurement and

incorrect mode of payment (loan part) of the block grant in Red Book. The annual program needs to be

revised to incorporate changes in activities. The Team has found the budget for the GoN counterpart to be

sufficient. An SoE review carried out on a sample basis found that SoE-related records and documents

were being maintained properly in the required format. The internal audit of FY 2013/14 reported excess

payment of daily allowance and some internal control weaknesses, for which the Team suggested

necessary actions for resolution. These actions include the PCO either recovering the excess daily

allowance as cash refunds or adjusting from salary payments, as well as the TDF making insurance

coverage of fixed assets in case of internal control weaknesses and related insurances. There are no

Implementation Progress Reports (IPRs) pending, all but one of the previous agreed actions have been

completed. The FY 2013/14 audit report has yet to be submitted despite a warning letter having been sent

on February 24, 2015; project accounts as well as the TDF financial statements thus remain overdue.

Total disbursement as of February 12, 2015 is USD8.68 million, consisting of USD 3.39 million from

Credit and USD5.29 million from the Grant Account, which was about 48.45% of the total allocation.

The net use of resources, excluding the Designated Account advance, was about 20.65% of the total

allocation. There have been delays in submitting withdrawal applications for FY2014/15 expenses.

Reimbursable expenses of NPR 64.16 million of FY 2014/15 are yet to be transferred to the government

treasury. Given remaining pending issues, the performance rating for financial management remains

Moderately Unsatisfactory.

VI. Key Implementation Issues and Agreed Priority Actions

13. The following implementation issues were discussed and priority actions were agreed:

Municipalities need to closely monitor construction progress and make arrangements for operations and management of assets built. Municipalities, with support from the PCO/MST,

need to closely supervise achievement of milestones to ensure works are completed within the

project period; particular attention needs to be paid to expedite implementation of the four

delayed sub-projects – Tansen Temple Conservation, Mechinagar Gate Beautification,

Mechinagar Gokul Marg Road Upgrading and Dhankuta Hile Bus Park. If the contractor for the

Dhankuta Hile Bus Park sub-project is not mobilized by March 15, 2015 the municipality will not

have sufficient time to complete the works within the project period, and the sub-project would

need to be dropped. Municipalities also need to expedite processing of variations and carefully

manage extensions to ensure that there is sufficient time for processing revisions and

implementation of works. Itahari municipality needs to quickly settle design issues for the Kheti

Khola Bridge with support from the PCO/MST and ensure works can start before the monsoon

season. The Team discussed with the municipalities the need to make timely arrangements for

operation and management of assets built under the project and make arrangements to contract

out services to the private sector when required. The Team reminded Dhankuta municipality to

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start the process of contracting out the management of slaughterhouse facilities for the Dhankuta

Hile Market to the private sector with support from the PCO/MST.

PCO needs to provide municipalities with the support required to implement institutional development activities that are critical for the achievement of the PDO. Limited progress has

been made with institutional development activities for municipalities given the delay in hiring

the MST. While Operations & Maintenance (O&M) plans for Lekhnath, Baglung and Mechinagar

have been prepared, the preparation of REPs and Investment Plans in the three municipalities has

been delayed. As a result, these plans could not be approved as part of the FY2016 municipal

budgeting process in January 2015. A timeline was agreed to ensure that plans are finalized and

Performance Agreements signed between the municipalities and the PCO at the earliest; the

municipalities committed to approve the plans at the next Municipal Council meeting this FY.

MST has started the process of updating the FY14 REPs, O&M plans and Investment Plans in

Tansen, Itahari and Dhankuta municipalities. Due to the recent annexation of adjacent Village

Development Committees (VDCs) within the municipal boundaries, the population and land area

of Dhankuta, Lekhnath and Itahari municipalities has increased significantly2. Municipalities

have requested technical support under the project to introduce property and business taxes in the

annexed VDCs, starting from the next FY, as part of the implementation of REPs. These changes

need to be reflected in the REPs and Performance Agreements. Consultants for revenue billing

software development – a critical activity for the implementation of REPs – have mobilized. The

timeline and implementation arrangements were agreed during the mission to ensure that the

software is ready for use by the municipalities by June 15, 2015. MST will support the

municipalities with the implementation of the REPs – the most urgent activities are data

collection for the revenue software, tax collection, and awareness campaigns. The Team

reminded the PCO of the importance of closely monitoring the implementation of activities

agreed in the Performance Agreement signed by the municipalities.

14. The status of priority actions agreed during the Tenth Implementation Review is summarized in Annex VI. The following priority actions have been agreed during the Eleventh Implementation Review:

Priority Action Responsible Agency Milestone Date

Commence construction works for Bus Park sub-

project. Dhankuta municipality March 15, 2015

Submit overdue audit reports for FY 2013/14. PCO March 31, 2015

Approve REPs, O&M Plans and Investment Plans

and sign Performance Agreements with the PCO.

Lekhnath, Baglung and

Mechinagar municipalities, with

the support of PCO/MST

May 15, 2015

Ensure revenue billing software is ready for use by

the municipalities. PCO June 15, 2015

15. A summary of the actions agreed during the review is included in Annex VII.

VII. Proposed Timing and Focus of Next Implementation Review

16. The next implementation support review will be carried out in May 2015.

2 The population of Itahari has increased from 77,000 to 143,000 as a result of annexation of 4 adjacent VDCs. The

population of Dhankuta municipality has increased from 28,000 to 39,000 following annexation of two adjacent

VDCs. The population of Lekhnath has increased from 59,000 to 69,000 due to annexation of one adjacent VDC.

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Annex I: List of Persons Met

Ministry of Urban Development Mr. Arjun Kumar Karki, Secretary

Dr. Mahendra Subba, Joint Secretary

Mr. Padam Kumar Mainali

Mr. Navin Devkota, Senior Divisional Engineer

Ministry of Federal Affairs and Local Development Mr. Tulsiram Marashine, Section Officer

Department of Urban Development and Building Construction (DUDBC) Mr. Shambhu K.C., Director General

Mr. Ramesh Prasad Singh, Deputy Director General/Project Director

Mr. Dwarika Shrestha, Joint Secretary

Mr. Chakravarti Kanth, Sr. Divisional Engineer/Deputy Project Director

Mr. Tika Ram Paudel, Component Manager

Mr. Sailendra Dulal, Account Officer

Mr. Sabin Karmacharaya, Engineer

Mr. Dhruba Dahal, M&E Specialist

Mr. Yam Nath Neupane, Financial Management Specialist

Mr. Shakti Shrestha, Procurement Specialist

Town Development Fund (TDF) Mr. Sushil Gyawali, Managing Director

Mr. Dron Pun, Manager-Environment and Social Safeguard

Mr. Maniram Singh Mahat Director, PME Center

Mr. Harka Bahadur Chhetri, Director

Mr. Man Bahadur Gurung, Engineer

Mr. Suman Mehar Shrestha, M&E Engineer

Municipal Support Team

Mr. Padam Bahadur Chettri, Team Leader

Tansen Municipality Mr. Ramchandra Lamgade, Executive Officer

Baglung Municipality Mr. Jagannath Lamichhane, Executive Officer

Machinagar Municipality Mr. Krishna Prasad Panthi, Executive Officer

Lekhnath Municipality Mr. Ram Chandra Paudel, Executive Officer

Dhankuta Municipality

Mr. Agni Prasad Adhikari, Executive Officer

Mr. Mingma Dorje Sherpa, Engineer

Mr. Promod Neupane, Supervision Engineer

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Mr. Raju Guragain, Tax Officer

Mr. Nush Raj Shrestha, Manager, RUPP

Mr. Damber Rogu, Section Officer

Itahari Sub-Metropolitan City Mr. Pashupati Khatiwada, Executive Officer

Mr. Arjun Dahal, Engineer

Mr. Amit Kuma Gupta, Supervision Consultant Engineer

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Annex II: Results Framework

Year 1: FY 2011/12; Year 2: FY 2012/13; Year 3: FY 2013/14; Year 4: FY 2014/15; Year 5: FY 2015/16 (Nepal Fiscal Year ending July 2015).

Estimates for FY 14/15 as of January 2015.

Project Development Objective (PDO): To improve the capacity of the participating municipalities to plan, implement and fund urban development

activities.

Project Development Objective

Indicators

Base-

line

(Y1)

Target and Achievement Reference Comments

Year 2 Year 3 Year 4 Year 5

Increase in

municipal own

source revenues

in the

participating

municipalities.

Percentage

annual

increase 15

Target % 15 15 20 25 Revenue

statements of

municipalities

Target for year 4 is likely to

be achieved. Own source

revenue increased by 24% in

six months of Y4 compared to

same period of Y3. Actual % 18 30

Number of

participating

municipalities

with funded

investment and

O&M plans.

Number

0

Cumulative

Target 0 3 6 6

Target for year 4 can be achieved. MST is on board to

support municipalities, but the

timeline is very tight and

activities need to be closely

monitored.

Cum.

Achievement 0 3

Municipal sub-

projects under

implementation

with construction

works on track as

per the signed

contracts.

Percentage of

Component 2

Sub-projects

0

Target % 0 80 80 90

Target for year 4 can be achieved. Percentage is

slightly below target for year

4. As of February 2015, 12

out of 16 sub-projects are on

track, equivalent to 75% of

sub-projects. A sub-project is

on track if 50% of target is

achieved by 80% of contract

time, and 90% of target is

achieved after that.

Actual % 0 80

Total number of

people benefiting

from project

activities.

Number

25000

Cumulative

Target 36,000 50,000 70,000 92,000

Annual program

and progress

reports submitted

by the

municipalities

Target for year 4 is expected

to be achieved. Estimated

number of cumulative

beneficiaries by the end of

Year 4 is 86,642.

Cum.

Achievement 26,733 54821

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Female

beneficiaries, as

percentage of

total

beneficiaries

Percentage

Sub Type

Supple-

mental 35

Target % 35 35 35 35

Annual program

and progress

reports submitted

by the

municipalities

Indicator on track for year 4.

Estimated female

beneficiaries is 44% of total

beneficiaries.

Actual % 51 45

Disadvantage

groups, as

percentage of

total

beneficiaries

Percentage

Sub Type

Supple-

mental 10

Target % 10 10 10 10

Annual program

and progress

reports submitted

by the

municipalities

Indicator on track for year 4.

Estimated beneficiaries from

disadvantaged groups is 54%

of the total beneficiaries.

Actual % 59 53

Intermediate Results Indicators

Component I: Strengthening Municipal Planning Capacity for Urban Development

Municipal grants

allocated to

programs

targeting women,

children and

disadvantaged

groups.

Percent of

Municipal

Grant

allocated to

target groups 35

Target % 35 35 35 35 Annual program

submitted by the

municipalities

Indicator for year 4 is slightly below the target.

Municipalities revised the

annual program sent in

beginning of the year and

34% of the grants allocated

target women, children and

disadvantaged groups.

Actual % 35 34

Number of

municipalities

submitting

satisfactory

annual plans for

the municipal

block grants to

the MoUD by

August 15 (one

month after the

start of the FY).

Number

n/a

Target n/a 6 6 6

PCO records Target achieved for year 4. All six municipalities

submitted annual plans of

activities to the PCO for the

FY 2014/15 municipal block

grant by August 15, 2014.

Actual n/a 6 6

Number of

municipalities

submitting

satisfactory

Number

n/a Target n/a 6 6 6

PCO records Target for year 4 achieved. All six municipalities

submitted progress reports for

the municipal block grant of

10

annual progress

reports to MoUD

for municipal

block grants by

September 15

(two months

after the end of

the Fiscal Year).

Actual n/a 6 6

FY 2013/14 to the PCO by

September 15, 2014.

Component II: Capacity Building for Municipal Infrastructure Development

Number of municipal

infrastructure sub-

projects successfully

appraised and ready

for bidding (i.e.,

procurement notice

published).

Number

0

Cumulative

Target

3

(16%)

13

(72%)

18

(100%)

18

(100%)

Indicator has been achieved.

All sub-projects have entered

construction phase. The total

number of municipal sub-

projects has been reduced

from 18 to 16, and invitation

notices for all 16 bids were

published in FY 13/14.

Cum.

Achievement

3

(18%)

16

(100%)

16

(100%)

Percentage of funds

for municipal sub-

projects disbursed.

Percent of

sub-

project's

budget 0

Cumulative

Target 0 20 60 100

The target for year 4 is

unlikely to be met. Expenditure against the

contract amount based on

financial progress is 14.45%. Cum.

Achievement 0 9.8

Component III: Institutional Development

Policy guidelines and

procedures for

municipalities on

governance and

budget planning

updated and

implemented by

MoFALD.

Text

No

Target No Yes

(Updated)

Yes

(Imple-

mented)

Yes

(Imple-

mented)

Target for year 4 is unlikely to be met. Preparation of ToR

has been delayed and

consultants are yet to be hired.

Target can be achieved in

year 5. Actual No No

Policy guidelines and

procedures for

municipalities on

physical planning

and infrastructure

Text

No Target No Yes

(Updated)

Yes

(Imple-

mented)

Yes

(Imple-

mented)

Target for year 4 is expected to be achieved. Draft strategy

for Nepal Urban Development

has been prepared and is

expected to be finalized and

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development

developed/updated

and implemented by

MoUD.

Actual No No

implemented in year 4.

TDF collection ratio

meets prescribed

thresholds.

Percentage

75 Target %

80

90

TDF Data Collection ratio (86%) is

slightly higher than the

target for year 3. Actual % 78 85

Standard lending

policies and

procedures applied to

all ETP municipal

sub-projects.

Text

No

Target No Yes Yes Yes Target is achieved in year 3.

Actual Yes Yes

Number of

municipalities that

have developed and

approved planning

norms and building

bye-laws based on

the guidelines issued

by MoUD.

Number

0

Cumulative

Target 0 3 6 6

Target for year 4 is not likely

to be achieved in year 4.

Specific bye-laws have been

drafted for three

municipalities, but

finalization has been delayed

in the absence of MST; MST

is now on board and can be

expected to achieve the target

in year 5.

Actual 0 0

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Annex III: Implementation Progress by Component

1. This annex summarizes implementation progress for each project component.

III.I Strengthening Municipal Planning Capacity for Urban Development (Component I)

2. The authorization letters for both first and second trimester installments of the FY15 block grant has been issued to all municipalities. However, municipalities were not able to receive the full amounts

from the concerned District Treasury and Control Offices (DTCO) due to incorrect mode of payment as

“direct payment” (instead of “reimbursable”) in the Red Book. This has delayed implementation of block

grant activities for this FY. Hence, the actual expenditure under this component is very low till date. This

needs to be rectified by the PCO at the earliest. It was agreed that the change in the mode of payment will

be made by March 7, 2015 and revised authorization letters will be issued to the municipalities. The Team

reminded the municipalities that the third tranche of block grants will only be released after the audit

report is submitted by the municipalities.

3. The municipalities have allocated budget for activities benefiting the targeted population (women and disadvantaged groups) after deducting ten percent amount for administrative expenditure according to

the guidelines (Table 1). The PCO had reviewed the draft annual program for FY 2014/15 to ensure that

the sub-projects meet the basic requirements in terms of target beneficiaries. As per the letter issued by

the PCO to Dhankuta Municipality to revise the program to allocate at least 35 percent budget to benefit

women and disadvantaged groups as per guidelines, the municipality has revised the program and revised

allotted budget for targeted people is 41 percent. The municipalities have submitted the first trimester

report for the block grant by December 17, 2014.

Table 1: Block Grant Allocation FY 2014/15 (NRs. ‘000)

Municipality Block Grant

Amount

Grant Allocated for Target

Population

% of Allocation for

Target Population

Mechinagar 14,921 5,433 36

Itahari 26,656 8,379 31

Dhankuta (*) 10,935 4,436 41

Tansen 9,023 2,842 31

Baglung 10,041 3,165 32

Lekhanath 23,424 7,633 33

Total 95,000 31,888 34

(*) revised to meet the required allocation for target population

Status of Actions Agreed during the Tenth Implementation Review of November 2014

Action Responsibility Target

Completion Date Status

Follow up on the status of the

authorization and ensure that the

municipalities receive the release

PCO December 15, 2014 Partially

completed. Authorization

letters were issued

to all

municipalities, but

they need to be re-

issued after

correcting mode of

payment in the Red

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Book.

Submit revised annual program to

MoUD and PCO for the FY 2014/15

Dhankuta

municipality

December 15, 2014 Completed. Dhankuta

submitted revised

program.

Actions for Strengthening Municipal Planning Capacity for Urban Development Component

PCO to correct mode of payment of the budget head for the municipal block grant from “direct

payment” to “reimbursable”, and issue revised authorization letters to the municipalities by

March 15, 2015.

14

III.II Capacity Building for Municipal Infrastructure Development (Component II)

3. Overall progress. Contracts for all municipal sub-projects have been signed, and construction works have started in all sub-projects except the Dhankuta Hile Bus Park sub-project. The overall

implementation progress of sub-projects has slightly improved, with 12 out of 16 sub-projects on track

(75%) compared to 10 out of 15 sub-projects (66%) having been on track in November 2014.

Implementation progress is significantly delayed for three out of 5 Track I sub-projects and one out of 11

Track II municipal sub-projects. These sub-projects need to be monitored very closely, in particular

Dhankuta Hile Bus terminal sub-project which is at risk of not being completed before the project closure

date if works do not start within one month. Although Itahari Bridge sub-project is currently on track, it is

also at risk of delay because of the issues raised with regard to the appropriate high flood level for the

bridge. The list of municipal sub-projects under implementation is presented in Table 2. The updated

status of implementation of sub-projects is presented in Table 3.

4. Status of Track I sub-projects. Out of five Track I sub-projects in the construction phase, two are progressing satisfactory, while progress with three sub-projects – Tansen Amar Narayan Temple

Conservation, Mechinagar Gate Beautification and Gokul Mark upgrading – has been significantly slow.

Works for Dhankuta Weekly Market are progressing satisfactorily and are almost complete, having

achieved 92% physical and financial progress. Implementation of the Dhankuta Hile Market

Infrastructure Improvement sub-project has also picked up, but progress may not enough to complete the

works within the contract period. The physical progress is about 22% after an elapse of about 60% of

contract period. The implementation progress of Tansen Amar Narayan Temple Conservation sub-project

has again slowed down. Though the contract has been extended for a three-month period through mid-

February, the physical progress is only at 70%. The PCO and the municipality have still not been able to

finalize the variation order initiated about five months ago to address the design issues involved in the

wall constructed of traditional bricks. Works in the Gokul Marg sub-project re-started only recently, after

the finalization of the variation order. Major efforts are required on the part of the contractor for the sub-

project to be completed within the contract end date of June 5, 2015. The Mechinagar Gate Beautification

sub-project has also made very slow progress and is now facing a problem while demolishing part of the

structures on the sides of the main gate, which is delaying progress. The municipality has also indicated

recently that it may not want to go ahead with the construction of landscaping works in Mechinagar Gate.

Now that MST is in place, these sub-project related issues to should be addressed quickly and decisions

should be made to ensure smooth progress for the remaining duration of the sub-projects.

5. Status of Track II sub-projects. The construction contracts for all 11 Track II sub-projects have been signed and work has started in 10 sub-projects. The Mandare Park sub-project in Lekhnath

municipality is the first sub-project to have been completed. The Barah Chhetra Improvement sub-project

in Lekhnath municipality has made significant progress, having achieved 70% physical progress and 43%

financial progress. The Upgrading of Link Road and Construction of Bridges sub-projects in Itahari

municipality are also making satisfactory progress and are on track to meet the target completion dates.

The Shahid Smriti Park sub-project in Baglung has made about 40% physical progress and 10% financial

progress. And with almost 10 months of the contract remaining, the Baglung Upgrading of Roads sub-

project has made about 20% physical progress and 13% financial progress. The progress of works in the

Tansen Shreenagar Park sub-project is satisfactory with about 20% of physical works completed. There

has been problem with the construction of the Multi-purpose Building in Tansen as the space available for

construction is smaller than the proposed building by about 7 m length-wise and 1 m width-wise. The

consultant is revising the design of the building and the necessary retaining structures required for the

site. Construction works for the road sub-projects in Tansen and Lekhnath have just started, while

construction work has not yet started in the Dhankuta Hile Bus Terminal sub-project due to objection

from a local house owner regarding the construction of the bus terminal building. The municipality is still

working with the local house owners to solve the problem and expects to resolve it within the next 15

15

days. Dhankuta Hile Bus terminal sub-project is now in critical stage and may not be completed before

project closure if the issue relating to construction of terminal building is not resolved immediately. It was

agreed that if the issue is not settle and works do not start by March 15, 2015 the sub-project would be

dropped. Itahari Bridge sub-project is also at risk of delay (although current implementation progress is

satisfactory) because of the need to address the issue of adequacy of high flood level in Kheti Khola

bridge. Revisions in the designs need to be expedited if they are required to ensure sufficient time to

complete the works within the project period.

6. Construction supervision. Supervision consultants have been hired by the municipalities and have been mobilized on site. This has improved reporting to the PCO and helped speed up implementation.

The two MST regional facilitators are expected to provide additional support to the municipalities for

construction supervision. Municipalities need to expedite processing of variations and carefully manage

extensions to ensure sufficient time for processing revisions and implementation of works. The Team also

noted that some of the municipalities have not provided sub-project work schedules and performance

charts to the PCO despite the requirement for contractors to provide detailed work plans before receiving

the mobilization advance.

7. Management of assets built under the project. The Team discussed with the municipalities the need to timely make arrangements for operation and management of assets built under the project and

contract out services to the private sector when required. For example, Dhankuta municipality is planning

to mobilize a private operator to manage the Hile market including the slaughterhouse facilities.

Therefore, the municipality with the support of MST needs to start procurement immediately to avoid

delays in the operating of the market after completion of construction works. Other municipalities also

require support to make arrangements for contracting out management of assets (e.g. markets and parks)

built under the project. It is agreed that the PCO through MST will provide support to the municipalities

to identify best arrangements for management of assets and prepare draft management contracts with

clear procedure for procurement of private sector. See actions agreed under component 2. Municipalities

will communicate plans for management of assets built under the sub-projects to the PCO/MST and based

on the plans the MST will prepare plan to support municipalities.

8. Loan and grant commitments for the municipal sub-projects. All 16 sub-projects are contracted out. A provision of 15% cost overrun is estimated on the awarded contracts' amount as well as on the bid

amount under the contract awarding process to estimate IDA loan and grant commitments. The IDA loan

and IDA grant allocations for the municipal sub-projects are USD 3.3 and USD 4.5 million, respectively,

for a total of USD 7.8 million including approved variations. The estimated IDA loan and IDA grant

commitments are USD 1.9 million and USD 3.1 million, respectively; this is equivalent to about 39% to

61% loan-grant mix for the 16 municipal sub-projects. The loan-grant ratios are estimated on the basis of

the loan grant agreement between the TDF and municipalities in line with the project’s loan grant policy.

Loan and grant commitments are summarized in Table 4.

9. Financial progress and expenditure for municipal works. The financial progress of the sub-projects has improved and is now almost on par with the physical progress. The Dhankuta Weekly Market

sub-project has achieved about 92% financial progress, while three other sub-projects – namely Lekhnath

Mandare Park sub-project, Lekhnath Barah Chhetra sub-project and Amar Narayan Temple sub-projects –

have achieved financial progress greater than 40%. The other sub-projects have achieved a financial

progress between 28% and 0%. The financial progress of all sub-projects is presented in Table 3, while

the actual and projected disbursement for each quarter of FY 2014/15 has been presented in Table 5.

Though the actual expenditures for the sub-projects in the first and second quarters of FY 2014/15 is US$

174,253 and US$ 465,405, respectively, disbursement for the two quarters is only US$ 226,891 for

expenditure incurred in the last FY; this is mainly due to the long time lag between the expenditure and

the submission of withdrawal application.

16

10. Contribution to PDO through municipal capacity building. Measuring capacity building is as complex as it is multi-dimensional. Sustainable capacity is built if the recipients of capacity building

training internalize what is being taught. The starting point is, therefore, awareness creation. Under this

project, procedures and processes for planning, designing and implementation of works have been

introduced; the municipalities have been assisted to enforce more stringent and systematic requirement

than they are normally accustomed to. The project has introduced the need for proper quality control of

works through monitoring requirements; improved progress reporting; emphasized inter-relationship

between physical progress and financial progress; and enhanced contract administration. While these may

not seem new, actually having them implemented is an achievement. To assess the effectiveness of

capacity building efforts under the project, it has been agreed that a survey will be carried out to study

how the stakeholders – residents of the municipality, the municipal staff, the contractors and consultants

involved and government staff, the private sector – view how the project has helped the municipality to

enhance its capacity. This will improve understanding on whether the project been able to create

awareness within the municipality.

17

Table 2: List of Municipal Sub-projects

Municipality No. Sub-project Name

Track I Sub-projects

Tansen 1 Amar Narayan Temple Conservation

Dhankuta 2 Dhankuta Weekly Market Infrastructure Improvement

3 Hile Market Infrastructure Improvement

Mechinagar 4 Mechinagar Gate Beautification

5 Upgrading of Gokul Marg

Track II Sub-projects

Baglung 6 Sahid Smriti Park Development

7 Upgrading of Access Road to Deprived Community (Track I and Track II)

Tansen 8 Upgrading of Existing Roads in Urban Areas, including: a) Bus Park to

Mission Hospital; (b) Mission Hospital to Eye Hospital; (c) Gaurishanker to

Holangdi; (d) Bandevi to Laxmi School; and (e) Prabash to Baghkhor

9 Multi-Purpose Building (shops and guest rooms)

10 Shrinagar Park Improvement

Lekhnath 11 Barah Chhetra Improvement

12 Picnic Spots & Amusement Zone at Mandare Park

13 Upgrading of Roads in Urban and Peri urban Areas, including: (a) Oil Nigam

To Rithe Pani; (b) Dahar No.3; (c) Dahar No.4; (d) Wada Sewa Kendra to

Deurali Khola; (e) Buddha Tole to Dadapari; and (f) Universal Chowk to

Kholako Chheu

Itahari 14 Upgrading of Link Road

15 Construction of Bridges on the Link Road

Dhankuta 16 Basic Service Facilities for Hile Bus Park

18

Status of Track I Municipal Infrastructure Sub-projects

11. Tansen Amar Narayan Temple Conservation Sub-project. The sub-project was signed on June 20, 2013. The contract amount is NPR 34,428,173.87, including VAT. While the start date of the sub-project

was July 20, 2014, the work order was not issued by the municipality until August 17, 2014. The

contract’s original end date was November 16, 2014, but it has been extended by three months until mid-

February, 2015. The construction works have been significantly delayed with only about 70% of the

physical work having been completed to date, with 53% financial progress. The variation in the contract

initiated five months back to address the design issues relating to buildings constructed with traditional

bricks, or DachiAppa has not yet been finalized. The contractor has requested for extension of contract by

further 3 months. The team expressed concern for delay and PCO has agreed to expedite it to complete

the works without further delay.

12. Dhankuta Weekly Market Infrastructure Improvement Sub-project. The contract was signed on July 12, 2014. The contract amount is NPR 16,310,868.92, including VAT. While the start date of the

contract is August 11, 2014, the work order was only issued by the municipality on September 19, 2014.

The municipality extended the original contract end date of December 18, 2014 by three months to March

18, 2015. The variation proposal for the sub-project has been approved and the municipality has issued

variation order. The physical progress now is about 92% and the works for provision of electricity, water

supply and finishing works are still remaining. The municipality is preparing second variation order to

address cultural issues relating to Athpariya Rai Shrine of Sri Marga temple. The team advised the

municipality to complete all works by the contract end date in March 2015. The financial progress of the

sub-project is about 92%.

13. Dhankuta Hile Market Infrastructure Improvement Sub-project. The contract was signed on April 4, 2014. The contract amount is NPR 34,620,384.09, including VAT. The start date of the contract

is May 4, 2014 and the construction period is 15 months. The sub-project has made good physical

progress during the last 3 months and has co mpleted about 22% of works against the planned target of

34% by mid January. The physical progress during site visit in mid February is more than 35%. The

construction of slaughter house, permanent and temporary sheds, public toilet, soak pit and septic tanks

are ongoing. The team advised for some improvement in workmanship in brickwork and concreting work.

The financial progress of the sub-project is about 24%.

14. Mechinagar Gate Beautification Sub-project. The construction contract for this sub-project was signed on July 15, 2014. The contract amount is NPR 12,632,810.99, including VAT. The construction

period of the sub-project is 15 months. The contractor has started construction work but is facing problem

in demolishing part of adjoining buildings.. The PCO and MST engineers have visited the site and are

preparing revised design.. The municipality is also considering reducing the scope of landscaping work.

The PCO has advised the municipality to decide on scope of landscaping works, but no decision has yet

been taken. The physical progress of the sub-project is only about 5% against the planned target of 34%,

and financial progress is at 12%. The team advised PCO and the municipality that the further delay would

land this sub-project at risk of not completing by the project closure.

15. Mechinagar Gokul Marg Road Improvement Sub-project. The contract was signed on February 4, 2014. The contract amount is NPR 32,589,607.77, including VAT. The start date of the contract is March

6, 2014 and the construction period is 15 months. The variation order for changes in drain and road has

been approved and issued to the contractor. The contractor has now started construction works but is not

very likely to complete the works within the stipulated contract period unless extra efforts are made. The

physical progress to date is only about 25% against the planned target of 85.5%. The sub-project is

significantly delayed and is not on track.

19

Status of Track II Municipal Infrastructure Sub-projects

16. Baglung Shahid Smriti Park Sub-project. The construction contract for this sub-project was signed on June 9, 2014. The contract amount is NPR 9,319,313.82, including VAT. The contract start

date is July 9, 2014 and the construction period is 9 months. Though there has been some delay in

commencement of this sub-project, it has made good progress over the last three months. The physical

progress of the sub-project now stands at 40%, and the financial progress at 10%. The contractor needs to

make extra effort to complete the sub-project by the contract end date of April 7, 2015. The team advised

PCO and the municipality to monitor progress to complete the sub-project in time.

17. Baglung Upgrading of Access Road (combined Track I and Track II) Sub-project. The construction contract for this sub-project was signed on June 16, 2014. The contract amount is NPR

112,768,983.70, including VAT. The contract start date is July 16, 2014 and the contract period is 18

months. The physical progress of the sub-project is about 20%, against the planned target of 24.5%. The

new construction supervision engineer for the sub-project has recently been recruited and mobilized. The

supervision engineer needs to review the issues identified in the inception report and take necessary

measure to expedite the progress of the sub-project.

18. Tansen Urban Roads Upgrading Sub-project. The construction contract for this sub-project was signed on November 21, 2015. The contract amount is NPR 91,092,100, including VAT. The contract

start date is December 21, 2015 and the contract period is 18 months. There have been delays in

commencement of works by more than one month. This is a critical sub-project with an expected sub-

project completion date of June 21, 2016, which is very close to the project closing date. So the PCO and

the municipality should very closely monitor the progress of this sub-project to avoid delays and to ensure

that the sub-project completion is not pushed beyond the project closing date.

19. Tansen Shrinagar Park Improvement Sub-project. The contract for this sub-project was signed on November 12, 2014. The contract amount is NPR 11,679,630.08, including VAT. The construction period

is 9 months. The sub-project has made good progress and has made about 20.2% physical progress

compared to planned target of 16.9%. The financial progress is about 9%.

20. Tansen Multi Purpose Building Sub-project. The contract for this sub-project was also signed on November 12, 2014. The contract amount is NPR 27,431,282.92, including VAT. The construction period

is 15 months. The construction work of the building has faced problems as the construction site was

found to be smaller than the proposed building. The consultant is revising the design of the building and

the retaining structures to suit the available site. The masonry retaining structures are under construction.

The physical progress of the sub-project is about 7.2%, compared to the planned target of 10%. The

financial progress of the sub-project is at 9%.

21. Lekhnath Barah Chhetra Improvement Sub-project. The construction contract for this sub-project was signed on June 24, 2014. The contract amount is NPR 9,749,102.90, including VAT. The

construction period is 12 months. The sub-project has made significant progress during the last three

months and has completed about 70% of physical works against the planned target of 40%. However, the

sub-project has not yet addressed the gaps in the provisions for the docking area, as identified during the

November mission. Financial progress is at 43%.

22. Lekhnath Mandare Park Sub-project. The construction contract for this sub-project was signed on April 27, 2014. The contract amount is NPR 5,603,914.00, including VAT. The construction period is

9 months. The sub-project construction work is complete and has made 100% physical progress. This is

the first sub-project to be completed. Financial progress, however, is significantly lower at about 58%.

20

23. Lekhnath Urban and Peri-urban Roads Sub-project. The construction contract for this sub-project was signed on November 12, 2014. The contract amount is NPR 85,132,622.50, including VAT. The

construction period is 18 months, with a construction end date of June 11, 2016. The joint survey of sub-

project roads has been completed. The construction of side drains of roads has just recently started.

Implementation needs to be expedited as the contract end date of this sub-project is very close to the

project closing date. The PCO and the municipality should closely monitor the progress of this sub-

project to avoid delays that could push the contract end date beyond the project closing date.

24. Itahari Link Road Improvement Sub-project. Itahari municipality signed the construction contract with the lowest evaluated bidder on July 28, 2014. The contract amount is NPR 72,398,415.61, including

VAT. The construction period is 18 months. The joint survey works has been completed. The contractor

has started construction of side drains from 4 locations and has completed about 3.5 km length. The

physical progress is about 16.4% compared to planned target of 27%. Financial progress is at 12%.

25. Itahari Bridges Sub-project. The contract for this sub-project was signed on October 31, 2014. The contract amount is NPR 53,569,438.29, including VAT. The construction period is 18 months. The

construction end date is May 29, 2016, which is very close to the project closing date. The sub-project is

making good progress with physical progress of about 4.6% compared to the planned target of 4.5%, and

financial progress of 9%. The abutments for Tengra Khola Bridge are under construction with both the

abutments now constructed to bearing level. The joint survey for Kheti Khola Bridge has been completed.

The survey has raised two issues, which need to be verified/studied: (i) level of high flood level adopted

in the design; and (ii) adequacy of soil analysis carried out for foundation design. The PCO and the

consultants are conducting review of design to reach conclusions on above issues. The PCO has agreed

that the review will be completed no later than March 2, 2015. The Team reminded that the delay in the

start of construction could push the contract end date beyond the project closing date.

26. Dhankuta Basic Services Facilities in Hile Bus Park Sub-project. The construction contract for this sub-project was signed on November 9, 2014. The contract amount is NPR 15,180,135.81, including

VAT. The construction period is 15 months. The construction work has, however, not started yet due to

objection by one houseowner against construction of the two-story terminal building. They have been

claiming ownership of part of proposed bus park land. The municipality has assured that the dispute will

be resolved by March 5, 2015 and the construction works started by March 15, 2015. The team reminded

municipality that there will not be sufficient time to complete sub-project before the project closure if

construction work is not commenced by the end of March 2015. The contractor has already received

mobilization advance and therefore, the financial progress is at 9%.

27. The status of actions for this component agreed during the implementation support review of November 2014 is presented in the table below.

21

Status of Actions Agreed during the Tenth Implementation Review

Action Responsibility

Target

Completion

Date

Status

Make available to the World Bank

work implementation schedule for

Dhankuta Weekly Market sub-

project, and project monitoring

charts for all Track I & Track II

sub-projects under

implementation (including

safeguard monitoring).

PCO December 15,

2014 for Track I

sub-projects;

December 31,

2014 for Track

II sub-projects

Partially completed. Work

schedules for 3 sub-projects

have yet to be submitted

(Tansen Road, Lekhnath

Road and Shahid Smriti

Park in Baglung).

Sign contracts for Tansen Road

Sub-project.

Municipalities and

PCO

December 15,

2014

Completed. Contract

signed on November 21,

2014.

Submit to the Team monthly

project implementation progress

reports showing implementation

status of each sub-project, any

problems related to the sub-

project and the actions taken to

address the problem, if any.

PCO Starting from

December 15,

2014

Completed. Monthly

reports for the month of

November and December

submitted, but reports still

needs some improvement.

Actions for Capacity Building for Municipal Infrastructure Development Component

Make available work implementation schedule for Tansen Road sub-project, Lekhnath Road sub-project and Shahid Smriti Park Improvement sub-project in Baglung by March 7, 2015.

Dhankuta municipality and PCO to resolve the dispute on land for construction of bus terminal building by March 5, 2015 and commence construction works by March 15, 2015 (priority).

Municipality with support from the PCO and the design consultants to review design of Kheti Khola Bridge to address the issue of high flood level and the bridge foundation by March 2,

2015, and settle design for the bridge by March 30, 2015.

Municipalities to communicate plans for management of assets built to PCO under the sub-projects by March 30, 2015.

PCO/MST to share the methodology for survey of municipal staff to document capacity improvements by April 30, 2015.

PCO/MST to provide technical support to municipalities to make arrangements for management of assets under the municipal sub-projects by May 30, 2015.

22

Table 3: Status of Municipal Sub-projects under Implementation

Sub-project Contract

signing date

Start date/

Work order

issue date

Estimated

construction

period

(months)

Target end

date

Implementation

period since

start date

(months)

Physical Progress Project on

Track

(Y/N)

Financial

Progress

(%) Planned Actual

Track I

Tansen Amar Narayan Temple

Conservation

June 20, 2013 Aug 17, 2013 15 Nov16, 2014 17.0 100 70 N 53

Dhankuta Weekly Market

Infrastructure Improvement

July 12, 2013 Sep 19, 2013 15 Dec 18, 2014 15.9 98 92 Y 92

Mechinagar Gokul Marg

Upgrading

Feb 4, 2014 Mar 6, 2014 15 June 5, 2015 10.4 85.5 20.5 N 28

Dhankuta (Hile) Market

Infrastructure Improvement

April 4, 2014 May 4, 2014 15 Aug 3, 2015 8.4 32 22 Y 24

Mechinagar Gate Beautification July 15, 2014 Aug 14, 2014 15 Nov 13, 2015 5.0 34 5 N 12

Track II

Lekhnath Mandare Park April 27, 2014 May 27, 2014 9 Feb 26, 2015 8.6 100 100 Y 58

Baglung Sahid Smriti Park

Development

June 9, 2014 July 8, 2014 9 April 7, 2015 6.3 NR 40 Y 10

Baglung upgrading of Access

Road

June 16, 2014 July 16, 2014 18 Jan 15, 2016 6,0 24.5 20 Y 13

Lekhnath Barah Chhetra

Improvement

June 24, 2014 July 23, 2014 12 July 22, 2015 5.8 40 70 Y 43

Itahari upgrading of Link Road July 28, 2014 August 27, 2014 18 Feb 26, 2016 4.6 27 16.4

Y 12

Itahari Bridges Construction Oct 31, 2014 Nov 30 , 2014 18 May 29, 2016 1.5

4.5 4.6 Y 9

Basic Service Facilities for Hile

Bus Park

Nov 9, 2014 Dec 9, 2014 15 Mar 8, 2016 1.2 7.5 Work not

started

N 9

Multi-Purpose Building

Construction

Nov 12, 2014 Dec12, 2014 15 Mar 12, 2016 1.1 10 7.2 Y 9

Shrinagar Park Improvement Nov 12, 2014 Dec 12, 2014 9 Sep 11, 2015 1.1 16.9 20.2 Y 9

Lekhnath Road Improvement Nov 12, 2014 Dec 12, 2014 18 June 11, 2016 1.1 NR Work

started

Y 0

Tansen Road Improvement Dec 15, 2014 Jan 15, 2015 18 July 15, 2016 0.8 NR Work

started

Y 9

Sub-project status as of January 15, 2015, NR indicates performance charts not received.

23

Table 4: Loan and Grant Commitments for Municipal Sub-projects

Municipality Name of Sub Project Sub Project

Category

(U=Utility,

S=Social)

Infrastructure Financing (in USD '000) (USD 1 = NPR 95)

Contracted

Amount

IDA (TDF)

Loan

IDA (TDF)

Grant

GoN

Grant

Municipal

Matching

Fund

Track 1 Sub-projects

Mechinagar Mechinagar Gate Beautification Project S 133 13 59 47 13

Upgrading of Gokul Marg U 334* 100 111 89 33

Dhankuta Dhankuta Weekly Market Infrastructure

Improvement

S 187* 19 83 67 19

Hile Market Infrastructure Improvement S 364 36 162 130 36

Tansen Amar narayan Temple Conservation S- 58%, U -

42%

362 67 144 115 36

Track 2 Sub-projects

Itahari Improvement of Link Road U 762 229 254 203 76

Construction of Bridges in the Link Road U 564 169 188 150 56

Dhankuta Improvement of Hile Bus Park S 160 16 71 57 16

Baglung Improvement of Shahid Smriti Park S 98 10 44 35 10

Upgrading of Baglung Access Road U 1187 356 396 317 119

Tansen Improvement of Existing Road U 959 288 320 256 96

Improvement of Shreenagar park S 123 12 55 44 12

Construction of Multipurpose Building U 289 87 96 77 29

Lekhnath Improvement of Barah Chhetra Park S 116 12 52 41 12

Improvement of Mandare Park S 59 6 26 21 6

Improvement of Existing Road U 896 269 299 239 90

All Consulting Services 293 0 264 0 29

Total 6887 1688 2623 1887 689

TDF service fee 1.5% of grant disbursement 39 0 39 0 0

Contingency @15% on contract amount 1033 253 393 283 103

Grand Total 7959 1941 3055 2171 792

Note: *Contracted amount is based on the variation order.

24

Table 5: Expenditure for Track I and Track II Sub-projects (USD)

S.N. Track I

Sub- Project Name

Estima-

ted

Amount

(US$)

Contract

Amount

(US$)

Contract

Date

Construc-

tion period

(MM)

Disburse-

ment till

June 2014

Expenditure in FY 2014-15 Cumula-

tive

Annual

(2014-15)

I Qtr. II Qtr. III Qtr. IV Qtr.

Actual Actual Estimate Estimate

Track I Sub-projects

1 Tansen Amar Narayan

Temple Conservation 397,061 362,402 20-Jun-13 15 41,597 46,765 72,106 107,335 58,359 284,565

2 Dhankuta Market Area

Improvement 187,853 187,151* 12-Jul-13 15 86,215 0 30,862 37,446

68,309

3 Dhankuta Hile Market

Area Improvement 408,256 364,402 4-Apr-14 15 28,202 0 14,101 49,197 81,996 145,294

4 Mechinagar Gate

Beautification 147,912 132,977 15-Jul-14 15

9,905 4,937 23,962 33,280 72,084

5 Mechinagar Gokul

Marga Road 682,311 333,939* 4-Feb-14 15 39,000

0 46,309 77,182 123,491

Total for Track I Sub-projects 1,823,393 1,380,894

195,014 56,670 122,007 264,249 250,817 693,743

Note: *Contracted amount is based on the variation order.

25

S.N Track II

Sub- Project Name

Estimated

Amount

(US$)

Actual

Contract

Amount

(US$)

Contract

Date

Construc

-tion

Period

Disburse

-ment till

June

2014

(US$)

Expenditure in FY 2014-15 Cumulati

ve

Annual

I Qtr. II Qtr. III Qtr. IV Qtr.

Actual Actual Est Est

Track II Sub-projects

1 Baglung Sahid Smriti Park Development 155,956 98,098 9-Jun-14 9

8,645 0 22,072 26,486 57,204

2 Baglung Upgrading of Road 2,192,462 1,187,04

2 16-Jun-14 18

93,889 46,945 106,834 160,251 407,918

3 Tansen Upgrading of Roads 1,321,322 958,864 21-Nov-

14 18

0 74,932 129,167 129,167 333,825

4 Tansen Multi Purpose Building 305,672 288,750 12-Nov-

14 15

0 22,483 38,981 64,969 126,433

5 Tansen Shrinagar Park Improvement 139,762 122,943 12-Nov-

14 9

0 9,474 27,662 27,662 64,798

6 Lekhnath Barah Chhetra Improvement 123,681 115,963 24-Jun-14 12

8,932 35,793 20,873 26,092 91,689

7 Lekhnath Picnic Spots at Mandare Park 60,700 58,989 27-Apr-14 9 4,204 0 26,436 18,581 14,377 48,886

8 Lekhnath Upgrading of Road 1,582,631 896,133 12-Nov-

14 18

0 0 80,652 120,978 201,630

9 Itahari Upgrading of Link Road 1,229,991 762,089 28-Jul-14 18

0 58,624 68,588 102,882 230,094

10 Itahari Construction of Bridges 668,616 563,889 31-Oct-14 18

0 44,716 50,750 76,125 171,591

11 Dhankuta Basic Service Facilities Hile Bus Park 168,262 159,791 9-Nov-14 15

0 12,474 14,381 21,572 48,427

Total of Track II Sub-Projects 7,949,055 5,212,551

4,204 111,466 331,876 578,822 760,331 1,782,495

Consulting Services 292,588 293,173

47,605 6117 11,522 25,292 30,334 74,287

Total of Track I & II Sub-Projects and Consulting

Services 10,045,530 6,886,618

246,823 174,253 465,405 868,363 1041482 2,550,525

26

III.III Institutional Development Component

(a) Institutional Development for the Municipalities

Preparation/update of REPs, O&M Plans and Investment Plans

28. The MST will support Tansen, Dhankuta and Itahari municipalities to update the REPs, O&M Plans and Investment Plans approved in FY14. The revisions need to take into account change in

municipal boundaries and increase in population due to addition of areas under the adjacent VDCs in

Dhankuta and Itahari municipalities and the additional activities required as a result of this addition. In

particular, municipalities requested project support to introduce property and business taxes in the

annexed areas. The targets and the implementation support plans included in the Performance Agreements

need to be updated to reflect the change in population and land area resulting from the additions.

29. The preparation of REPs and Investment Plans for Mechinagar, Lekhnath and Baglung municipalities has been delayed. Only O&M plans have been prepared and are ready to be discussed with

the municipalities. As a result, municipalities could not approve the plans as part of the FY16 budgeting

process which was completed in January 2015. The MST will support the municipalities with the

preparation of REPs and Investment Plans. Based on the plans, Performance Agreements between the

municipalities and the PCO will be drafted to set the targets to be achieved within the project period; the

Performance Agreements will include an implementation support plan spelling out the actions that the

municipalities commit to undertake and the technical support to be provided by the MST. Lekhnath

municipality will also require support for introduction of property and business taxes in the annexed

VDC, and these activities will need to be reflected in the implementation plan. Municipalities agreed to

approve the REPs, O&M and Investment Plans off-budget at the next interim Council meeting (planned

for March/April 2015) since the deadline for approval of the plans as part of the FY16 budgeting process

has been missed.

Implementation of Revenue Enhancement Plans

30. The main activity funded under the project for the implementation of REPs is the development of revenue billing software in the six municipalities. In FY15, while the billing software is being prepared,

the MST will provide technical support to municipalities to carry out tax awareness campaigns, which are

expected to contribute in the short-term to increase own-source revenue in the municipalities. The goal is

to complete the development of the revenue billing software by end of FY15 so that municipalities can

issue bills and accrue benefits in the last year of project implementation. It was agreed that the software

would be installed in each ward to facilitate payments and reduce waiting time. The following critical

actions need to be completed by the PCO/MST to support municipalities with the tax awareness

campaigns and the development of billing software: (a) expedite preparation of data collection formats for

revenue billing software and material for tax collection and awareness campaigns; (b) establishment of

working group including MoFALD and PCO to closely and regularly monitor every two weeks progress

with the development of the software and address critical issues as they arise; (c) support municipalities

with the implementation of data collection and tax collection and awareness campaigns.

Implementation of O&M and IPs

31. No progress has been made with the implementation of O&M and Investment Plans in Tansen, Dhankuta and Itahari municipalities following approval of the plans in FY14 because of delays in hiring

the MST. It was agreed that the MST will review whether the targets included in the Performance

Agreements for the implementation of the plans have been incorporated in the FY16 budgets approved by

the municipalities in January, and will support the municipalities with the update of the plans.

Municipalities committed to revise the FY16 budget if required following update of the plans to ensure

the targets set in the Performance Agreements are met.

27

PCO/MST support and monitoring for institutional development activities of municipalities

32. The PCO needs to urgently transfer funds to municipalities for the implementation of institutional development activities; the Team also requested the PCO to expedite the mobilization of

international and national municipal finance specialists at the MST. The Team reminded the PCO and the

municipalities of the importance of closely monitoring progress in achieving targets set in the

Performance Agreements. The PCO submitted a letter to Tansen, Dhankuta and Itahari municipalities to

request them to include the targets agreed in the Performance Agreements in the FY15/16 budget.

Municipalities during the mission confirmed that they have been complying with targets in the

Performance Agreements when approving the FY15/16 budgeting process. It was agreed that the

PCO/MST would verify whether the targets set in the Performance Agreements for Tansen, Itahari and

Dhankuta municipalities have been incorporated.

IT equipment for municipalities

33. The procurement of IT equipment for the municipalities and vehicle for the MST has been further delayed as the heading for the purchase of machinery items was missing in the PCO’s approved budget

for FY 2014/15. The PCO has been processing for amendment of the annual program to incorporate this

activity. The equipment for each municipality includes four desktops, three laptops and one server but it is

likely that this activity may not be completed within this FY.

Status of Actions Agreed during the Tenth Implementation Review

Action Responsibility

Target

Completion

Date

Status

Approve REPs, O&M Plans and

Investment Plans as part of FY16

budget process

Municipalities

with support of

PCO

January 31, 2015 Delayed.

Mobilize consultant for revenue billing

software development PCO

December 31,

2014 Completed with

delay.

Procure and deliver IT equipment to

municipalities PCO

February 28,

2015 Delayed.

Actions for Institutional Development Component for Municipalities

The PCO to disburse budget allocated for institutional development activities to all municipalities by March 15, 2015.

PCO/MST in coordination with municipalities to finalize the prototype data collection format and the materials and programs for tax awareness campaigns by March 15, 2015.

Tansen, Dhankuta and Itahari municipalities with support from the PCO/MST to provide status update to the World Bank on agreed targets included in the approved Performance Agreements by

March 15, 2015.

The municipalities to start tax awareness campaigns and data collection for revenue billing software with support from the PCO/MST by March 30, 2015.

Tansen, Dhankuta and Itahari municipalities with support from the PCO/MST will update the REPs, O&M plans and Investment Plans and the implementation action plans included in the

Performance Agreements by April 15, 2015.

Tansen, Dhankuta and Itahari municipalities with approve the updated REPs, O&M plans and Investment Plans and revised Performance Agreements by April 30, 2015.

Mechinagar, Lekhnath and Baglung municipalities will complete the REPs and Investment Plans with support from the PCO/MST by April 30, 2015.

28

Mechinagar, Lekhnath and Baglung municipalities will approve the REPs, O&M Plans and Investment Plans and sign Performance Agreements with the PCO by May 15, 2015 (priority).

The municipalities to complete data collection for revenue billing software and tax awareness campaigns by June 15, 2015.

The PCO will ensure revenue billing software is ready for use by the municipalities by June 15,

2015 (priority).

The municipalities to complete data migration, data entry and test run for the revenue billing software with support from the PCO/MST by June 30, 2015.

(b) Institutional Development for the PCO/DUDBC

34. Preparation of GIS maps in the six participating municipalities. Preparation of the GIS maps is in progress. The PCO signed the contract with the consultants on October 30, 2014, and the assignment is on

track to be completed by April 30, 2015. However, due to the expansion of three municipalities following

annexation of adjacent VDCs, the scope of the consulting assignment will need to be revised to cover the

new areas. In case of Itahari and Dhankuta municipalities, it is not possible to cover the new areas in the

current contracts, so the PCO has prepared separate Terms of References for preparation of GIS maps for

the new areas of these municipalities.

35. IT equipment for GIS unit of DUDBC and municipalities. The specifications for the equipment have been agreed, but the procurement has been delayed. There is sufficient budget in the current annual

program. The equipment will be procured and provided to the GIS unit of DUDBC as well as each of the

six municipalities.

36. Building and planning bye-laws for three municipalities and Drainage Master Plan for Itahari Municipality. The building and planning bye-laws that were prepared by the GIZ-funded MST consultants

for three municipalities – Tansen, Dhankuta and Mechinagar – will be finalized with support from the

MST; the bye-laws for Dhankuta municipality needs to be revised to include the annexed VDCs. It was

agreed that the MST will prepare implementation plans to identify capacity building activities required to

support the municipalities with enforcement of the bye-laws. The preparation of the building and

planning bye-laws for the other three municipalities (i.e. Itahari, Baglung and Lekhnath) will be initiated

by the MST. The Terms of Reference for the Drainage Master Plan for Itahari municipality need to be

revised to include the annexed VDCs, and the procurement process needs to be re-started based on

revised scope of work.

Status of Actions Agreed during the Tenth Implementation Support Review

Action Responsibility Target Completion

Date Status

Conduct municipal capacity needs

assessment to implement the bye-

laws.

PCO/DUDBC February 28, 2015 Delayed.

Award contract for the preparation

of drainage Master Plan in Itahari,

and have consultant begin

assignment.

PCO

January 31, 2015 Delayed.

Start procurement process for

hardware and software for the GIS

unit of DUDBC and sign contract.

PCO

December 22, 2014 Delayed.

Complete the preparation of GIS

maps for six municipalities. PCO

April 30, 2015 On track.

29

Actions for Institutional Development Component for PCO/DUDBC

PCO to complete preparation of GIS maps (original scope) for six municipalities by April 30,

2015.

PCO to award the contract for the preparation of the GIS maps of the new areas of Itahari and Dhankuta by May 30, 2015.

PCO/MST to ensure bye-laws for Tansen, Dhankuta and Mechinagar municipalities are approved by the Town Development Committees by June 30, 2015.

PCO/MST to prepare draft bye-laws for Itahari, Baglung and Lekhnath municipalities by June

30, 2015.

(c) Institutional Development for the TDF and Business Restructuring Action Plan

35. The progress in implementing the FY 2014/15 activities was reviewed during the mission. TDF

has proposed to procure consultancy services for training municipal finance officers in preparing financial

operating plans in a cluster of municipalities and institutionalizing the same in 58 municipalities. The

ToR was due by July 15, 2014 and the date was subsequently postponed to September 30, 2014. The ToR

was received and approved in January and the training for municipal finance officers was completed on

February 1-3, 2015. A total of 56 participants from 53 municipalities attended the orientation. Follow-up

small group training sessions to finalize the borrowing capacity assessment will be carried out by March

15, 2015. TDF has been requested to prepare a municipal finance strategy to support implementation of

the National Urban Development Strategy (NUDS). The municipal finance component is not for the

NUDS itself, which has been completed but for the operationalization of the NUDS. The ToR for the

proposed municipal finance strategy was approved in January 2015. Since the cost of this consultancy is

expected to be higher than the allocated budget, TDF would revise the allocations under its procurement

plan with PCO's concurrence. It was agreed that TDF would share the final ToR with concerned central

agencies (MoUD, MoFALD and Local Body Fiscal Commission) and issue the EOI by March 15, 2015.

36. FY 2013/14 activities have been delayed. The consulting assignment for the review of TDF's

financial appraisal manual was awarded on November 7, 2014, and the draft revised appraisal manual has

been submitted by the consultants. TDF has agreed to review the draft and approve the manual by March

15, 2015. The brochures originally expected to be ready by September 30, 2014 have now been submitted

by the consultants. TDF has agreed to approve them by March 15, 2015. The micro-banking gap analysis

assignment that was also expected to be ready by September 30, 2014 and is now expected to be finalized

only by end of February. Based on the findings of the gap analysis, the TDF would take further action on

the software recommendations made by the consultants. Regarding the default by TDF of loans due to

GON, the Team was informed that the request for rescheduling of TDF loans can now proceed since TDF

has received the necessary permission from ADB. On this basis action would be taken to reschedule the

TDF dues to GON by the end of this FY and would be reflected in the TDF annual statements for the next

financial year.

Status of Actions Agreed during the Tenth Implementation Support Review

Action Responsibility Target Completion

Date Status

Resolve default situation with GON TDF July 15, 2015

On track. ADB

permission has

been received and

TDF is expected

to obtain GoN

concurrence by

30

July 15, 2015.

Generate financial statements by

using micro-banking and MIS system TDF February 28, 2015

Completed. The

TDF will make

additions to its

software after

review.

Prepare ToR for (a) municipal finance

strategy; (b) orientation and training

for municipal finance officers for

municipal borrowing capacity

assessment; and (c) system

automation, linking micro-banking to

asset management and payroll system.

TDF December15, 2014

Completed with

delay.

Hire consultants for municipal finance

strategy. TDF January 31, 2015

Delayed. ToR

has been

approved and

TDF will issue

EOI by March 15,

2015.

Send the ToR for consultancy services

for training municipal finance officers

in preparing financial operating plans

in a cluster of municipalities and

institutionalizing the same in 58

municipalities.

TDF December 15, 2014

Partially

completed.

Training carried

out in February

1-3, 2015.

Follow-up

training sessions

planned to be

completed by

March 15, 2015.

Complete the review of TDF’s

financial appraisal manual and

training of TDF staff in financial

analysis

TDF February 28, 2015

Partially completed. Draft

received

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